The market reacted negatively to Sigma Pharmaceuticals’ December announcement that Pfizer – responsible for 10%-15% of Sigma’s revenue – is planning to distribute its products directly, thereby bypassing Sigma. The share price fell 15% on the day.
Shareholders should be happy. Using a balance sheet adjusted for the $900m sale of its manufacturing business to Aspen pharmaceuticals, shareholders have $693m of net working capital tied up in the business and the current market capitalisation is only $518m. Add up cash, inventory and receivables, subtract all liabilities and you’re left with some 33% more than the current share price.
If the balance sheet shrinks, that working capital would be available to distribute to shareholders (the company also has $78m in franking credits it could attach). The most effective way of shrinking the balance sheet would be to change the overly generous payment terms provided to customers. Another way is to simply lose them.
Functional cookies Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.